Lack of money or a profitable idea might be the first barriers you think of when it comes to starting up your own business, but female entrepreneurs are saying it’s a lack of financial literacy that’s holding them back the most.

Like many people who found themselves with extra time on their hands during pandemic lockdowns in 2020, Brooke Alexander decided to use her extra time at home to bring to life a small business idea.

After falling in love with some “amazing” cookies while travelling in New York in 2019, Ms Alexander started developing her own recipes at home, and Cookie Doughboy was born.

The Cookie Doughboy co-founder said the road to success would’ve been quicker if she’d been more financially literate. Photo: Intuit Quickbooks

Now, more than two years on, with online orders shipping Australia wide and constant orders from local Sydney cafes, Ms Alexander is flush with success and looking to expand further.

But she told TND when she and her husband and co-founder Danny were starting out, she had “no idea” of how to handle the financial side of the business.

“I just had to learn as I go,” Ms Alexander said.

“I think too, you don’t even know what questions to ask people, so a lot of it is trial and error.”

She said she’s finally on more solid ground after turning to Google and more experienced people for help, but having more financial knowledge could have helped the business grow more quickly.

“In retrospect … You’re so focused on what product you intend to sell, or what service you intend to offer, but I think it’s just as important that you have this financial understanding before you even start,” Ms Alexander said.

“So I would probably say to my myself back then, ‘Do a course, do an online course, or do a face-to-face workshop’, just to get a basic knowledge and understanding of the financial side of running a business.”

The gender gap

Female small business owners (SBOs) in Australia say financial literacy beats cash-flow management and inflation as the biggest barrier to overcome when setting up and running a small business, a survey by online accounting software provider Intuit QuickBooks found.

Out of 1000 female small business owners surveyed, 90 per cent  believe their understanding of financial literacy affects their ability to scale their business, while 60 per cent feel very confident in their level of financial literacy.

When it comes to financial literacy, there is a significant gender gap.

Women in Australia are on average less financially literate than men – in 2017, 48 per cent of women demonstrated an understanding of at least three basic financial literacy concepts, compared to 63 per cent of men.

The issue is significant for Australia, given small businesses account for up to 98.4 per cent of all businesses in Australia, with women representing 35.4 per cent of small business owner/managers.

The financial literacy gender gap generally emerges in pre-teen and teen years, and there could be a few reasons why this happens.

These could include women being more risk averse and less overconfident, which could make it more difficult to provide answers to financial questions when tested, or they could be subconsciously conforming to a gender stereotype.

No matter the reason behind the gender gap, experts says more support is needed for SBOs.

Support needed

Anne Nalder, Small Business Association of Australia founder and CEO, said lack of financial literacy is one of the biggest factors that could lead to small business to fail.

“A small business owner has to really wear two hats, and they’re both absolutely opposite to each other; one is the hat of the entrepreneur, that is the person who is creative,” she said.

“The other [hat] is administration … most people don’t like it … and yet it’s the area that you need to pay a lot of attention to because if you don’t, your business can collapse because of poor administration.”

Ms Nalder said trying to compete in today’s market, against several local and international competitors, means SBOs need to become more savvy and understand the fundamentals of how to make their business financially viable.

Matthew Addison, Council of Small Business Organisations Australia chair, said entrepreneurs should try and find mentors and relevant industry associations to advise them on what they need to know and when they need to know it.

“What we’ve seen is the most successful businesses are those that are attached to the appropriate advisers, the appropriate mentors and the appropriate industry associations,” he said.

“So if they are tapped into that knowledge base, then they are more likely to not make any errors.”

Mr Addison said the government should offer more support for SBOs to find appropriate mentors and advisers.

“Does every business entrepreneur need to be a financial literacy expert? Or should we have a system supported by government that allows them to get the right advice?” he said.